Flexibility is key in future planning, allowing you to look at new ways to acquire and finance new vehicles in a pinch. - Photo courtesy Jeffrey Smith via Flickr

Flexibility is key in future planning, allowing you to look at new ways to acquire and finance new vehicles in a pinch.

Photo courtesy Jeffrey Smith via Flickr

With rental companies facing vehicle supply restrictions while trying to rebuild their fleet, how can they fleet plan for the near future?

A panel of experts shared insights at a fleet-planning seminar at the recent International Car Rental Show. Topics included how to balance de-fleeting while acquiring new fleet, adjusting model mix for shifts in rental types, and understanding the present OEM sales environment.

Identify High-Equity Vehicles

No matter the condition of the market, a rental company needs to have a fleet plan. And for this past year, it’s also important to put flexibility into your plan.

Solomon Cramer, Vice President, Avis Budget Payless Licensee Association -

Solomon Cramer, Vice President, Avis Budget Payless Licensee Association

“During the last year and a half, we went from a period where we were canceling every order to desperately looking for vehicles,” said Solomon Cramer, a licensee of Avis Budget/Payless during the seminar. “I think the most important thing is to keep as much flexibility in your fleet plan as possible. That way, you can pivot to either add additional fleet or keep fleet if you want to enjoy the rental rates that we’re seeing or dispose of fleet into the highest used car market in history.”

For Phil Spink, putting flexibility into his fleet plan helped him to extend vehicle rental life and continue to take equity out of each unit.

“Instead of selling the cars that we planned to return, we re-evaluated our fleet plan,” said Spink, manager of the Sixt franchise for the Tom Wood Automotive Group. “We looked at the equity in every unit and ended up selling only the high equity units so we could maintain as much fleet in the rental program as possible. Instead of selling 50 to 60 cars that month, I only sold 15 with the high equity.”

Garrett Kautz, Relationship Sales Officer, Auto & Light Truck Division, 1st Source Bank -

Garrett Kautz, Relationship Sales Officer, Auto & Light Truck Division, 1st Source Bank

Garrett Kautz of 1st Source Bank saw rental companies exhibit more flexibility when unavailable to acquire vehicles from their normal dealer channels. Their plans switched to acquiring vehicles from the used car market.

Different Ways to Acquire Vehicles

With the vehicle supply shortage, fleets might want to consider purchasing different vehicles and mixing up how they acquire them.

“I bought 20 Nissan NV200 cargo vans,” said Cramer. “I didn’t have a market for the small cargo vans, but it was a vehicle that was available from the dealer. I got a decent value on them. When customers needed vehicles the past few months, the NV200s were the cheapest rental vehicles available. We put 5,000 to 6,000 miles on them the last couple of months.”

To add vehicles to his fleet, Spink looked at dealerships outside of his home market in Indianapolis. He ended up buying vehicles in Washington and Nevada and had them shipped. “Even with purchasing and shipping, these vehicles were still cheaper than what they were selling for in the Indianapolis market,” he said.

Additionally, Spink ordered repurchased units to keep more vehicles in his fleet. He reached out to his GM and Hyundai dealers to see if he could purchase the units.

Phil Spink, Franchise Manager, Sixt Rent a Car & Tom Wood Automotive Group -

Phil Spink, Franchise Manager, Sixt Rent a Car & Tom Wood Automotive Group

“GM allowed us to purchase all of our units with less longer-term allowance,” said Spink. “Even though we were only allowed to purchase 30% of the fleet that was in the repurchase program, Hyundai allowed us to purchase them all. I think relationships with vendors is still one of the most important things to have. Don’t be scared to ask and talk with them.”

Kautz added that several rental companies ended up financing with 1st Source when they wanted to keep vehicles in their fleet. “We started financing a lot of 24-month to 30-month-old vehicles that had fallen out of a fleet’s traditional financing plans with another lender.”

What’s to Come

Cramer thinks fleet is going to be very tight for a while. “If retail demand stays as hot as it has been, and especially if we have a tight supply, it’s going to be very hard to get fleet because we (rental) are not high-margin customers for manufacturers.”

(At the time of this session, the seasonally adjusted annual rate (SAAR) was forecasted to be 15.5 million cars. For September the estimate is 12.1 million light vehicle units, the lowest SAAR reading in 2021 so far.

Spink is optimistic but thinks new car deliveries won’t normalize until well into 2022, if that early.

“Our dealers are starting to take our requests for new vehicles,” said Spink. “I can’t imagine a delivery this year for new fleet. I do believe that we have some January/February deliveries available to us. We are holding our fleet as long as we can. We’ll probably dispose of some in the fall and repurpose some.”

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